It seems that all recent campaigns and attempts to get big businesses to pay their bills on time have failed and an outrageous figure of over £30 billion is owed to small businesses, meaning that they are providing funding to bigger businesses - that is just plain wrong!
The Business Secretary, Vince Cable, seems to think that the solution is to impose fines on businesses that fail to pay their suppliers on time, although that does rather seem like closing the stable door after the horse has bolted and provides little help to the cash flow of the small business with the outstanding and unpaid debt.
The problem seems to be that business culture has developed into one of accepting that 30 and 60 day credit terms are normal; and that has to change. We have moved far away from the days when it was commonplace for a sign to be hanging behind a shop counter with the words “please do not ask for credit as refusal often offends”. The time has come for small businesses to push back; they cannot afford to bank roll the cash flow of big businesses nor can they afford the overhead of a credit control function. And why should they?
There seems to be a fear that if credit is not offered then a sale will not be made to a customer, but is that fear really valid? Surely a customer worth having is one that buys a product or service from you and pays for it to the agreed payment terms. If they don’t pay on time then is that business you should really be chasing?
I run a business in a very traditional industry – accountancy. The norm is very much that the work is done and the invoice raised with the client paying some time in the future. The result is what is termed “lock up”; a large 'debtors and work in progress' balance. When I started my business six years ago lock up was something that I was determined to eliminate in my business model and I did exactly that with clients paying monthly fees. The result is that as we prepare and submit their annual accounts and tax returns the fees have already been paid. They're happy as the accountancy cost is spread throughout the year and we’re happy as we’ve been paid for the work done and do not need to worry about debtors and bad debts. In fact in the six years that we’ve been operating we’ve had only a handful of bad debtors out of nearly 2,000 clients; not a bad result given the recessional times we’ve just experienced.
Accountancy is an industry that changes very slowly but if the elimination of credit can happen here then why can’t it happen in every industry?
I recently came across an innovative solution to small business payment processing offered by People Per Hour (PPH) who “have a community of talent available to work, online, at the click of a button”. Simply put the web site provides a resource for buyer to meet sellers and transact. Once a sale is agreed a proposal is created and, if the buyer accepts it, payment is made with the amount being put into Escrow meaning that the money is held by a third-party, PPH in this case, on behalf of transacting parties. The funds are released to the seller once the sale has been completed, an invoice raised and the buyer agreeing that the work has been done. Funds can also be released if an invoice is overdue or as an outcome of a dispute resolution.
So all round it seems a rather good solution for a small businesses to ensure that they will be paid for the work that they’ve done as well as providing the buyer with an element of protection for shoddy workmanship or other disputes.
It seems obvious to me that the solution to businesses not paying bills on time is for an easy and free to use system of Escrow to be available to ALL small businesses in this country via Vince Cable’s new Business Bank. Rather than spend his time proposing a system of fines I’d like a call to action for him and the Government to really support small businesses in this country and make it compulsory for all sales to be paid on or before delivery or for the sale to be transacted via the Escrow system ensuring protection for both the buyer and the seller.
What objections could possibility be raised to such a common sense and practical solution?
The start of Series 11 of Dragons' Den kicked off last night with yet more ridiculous business valuations and lack of financial knowledge.
This first episode saw one of the best so far ... “Mr Wrap It Up” asked for a £500,000 (yes half a million!) investment for 11% of his business. That makes his business worth over £4.5m - in his mind. I must admit that his knowledge of his finances was rather impressive – the previous and current turnover and profit figures just rolled off his tongue as they should do for ANY and ALL business owners.
However, whilst making good profits, £180k in 2012 and projecting £250K in the current financial year, the finances just didn’t add up and the Dragons agreed. Surely with all that profit the business would be able to secure some bank or other financing for the building of premises without giving away any shareholding.
All that aside, the lack of financial acumen for some “entrepreneurs” going into the Dragons’ Den beggars belief. OK, so not every business owner needs to be an accountant but by golly if you are trying to persuade someone to invest huge amounts of money in your business you ought to know your finances better than you know the names of your other half, your children, your mother and anyone else important in your life!
For all previous years, the current year and projections for the next three years, you should know:
It would also be useful to have your cash, bank and any liability figures to hand – in fact an understanding of the balance sheet and the ability to talk through the position to anyone asking about it.
Of course, you need to make sure that the projections are realistic and based upon robust assumptions such as signed orders and new contracts – you may well be challenged if you spout ludicrous figures.
Taking a hard look at those figures you need to ask yourself if the valuation that you are putting on your business really stacks up or have you valued “vapour wear”!
Remember that the current business valuation is without the investment and without the expertise of a Dragon investor. Can you really justify the valuation figure or have you plucked it out of thin air?
The pitches to the Dragons often lack information on how the valuation was arrived at and why the entrepreneur thinks the business is worth that much.
Remember that this is a business investment decision – pure and simple.
The fact that the business may be “your baby”, your pride and joy, something that you’ve invested thousands of pounds in or whatever emotional reason you’d like to present is of no interest whatsoever to the Dragons. They just want to see when they will get a return on their investments and how much they are likely to multiple their investment by.
And finally, if you’re asking for a pot of money you need to be able to articulate where the money will be spent and what return that spend will yield.
Clearly you may not know all of the figures or even all of the terminology that I have used here but before you make an appearance on national TV I would suggest that you “learn your lines” otherwise be prepared to be made to look a fool.
But of course if you did present all of the above it wouldn’t make very good TV – would it!
Creativity is the backbone of most successful marketing campaigns. When you have it, dynamic and exciting ideas are produced. Without it, you end up copying the competition and so always stay that little bit behind.
There are pieces out there that offer advice when it comes to encouraging creative thinking, yet they all aim to change company culture, which takes time and a lot of work. Why not aim to sort out the simple things first rather than worry about the company culture? Here are a few practical tips when it comes to increasing creativity in your business.
Let’s be honest, a boring, drab, dark office has never inspired anyone to do anything. Yet it’s not difficult to make real changes. It’s well known that colour has an effect on mood, but have you ever thought about how that mood can affect creativity in the office? Bold, bright colours will help your people to stay positive, while introducing things that are a little “outside the box” will help to get the creative juices flowing. The best way to think differently is to be different.
Difference is important to creativity, so embrace different views! Look around your office; there are people with different roles, different backgrounds and different life experiences. They may be the key to your coming up with something that makes you different. Try to encourage discussion within the office; have regular informal meetings about anything creative and encourage people to read.
Knowledge development is important to a lot of major companies, so set aside time for you and your team to read up on your industry. Don’t just stop there though: look at other things that relate to you and your company. Remember to talk to each other and work together.
Want to improve your knowledge? Get out there and talk to people. This should not just be a job for senior people in the office – get everyone involved. Find out about local business meetings, media socials and start-up events. Go and talk to people, you’ll get free alternative insights into your business and you may even pick up a new team member, customer or supplier.
Ok, you don’t have to go for the full “Margarita Friday”, but it’s important to set aside time for you and your team to relax together. Think of it less of a team-building exercise, more of a case of relaxing with your mates. As a business you all have to work for each other, so the more relaxed you feel with each other the easier it will be for people to speak up and come up with more interesting ideas. You never know your “Margarita Friday” may produce the idea that makes your Monday morning.
John Jackson is a Marketing Executive for inbound marketing specialists Silverbean.
Every day, thousands of people set up their own businesses. Many will agree that starting your own business is a great, but challenging experience. You need to understand the ‘start-up’ process, because this makes a big difference to the success of your new business. Here are the necessary steps to consider when starting up your new business.
Coming up with a viable business idea can be challenging and initial brainstorming can help you to arrive at one. Think about issues that people are faced with every day and write them down. Helping to solve such problems could enable you to come up with some excellent ideas. You could even brainstorm ideas that improve existing products and services.
Tip: Think of products and services that will add value to people’s lives.
This is where you will validate your ideas. You need to determine and test whether your product or service is viable by researching your potential market.
Ask yourself, “Is my product or service niche? Is there space for it or is the market saturated?” Are you likely to make enough sales given the size and nature of your target market?
There are many ways in which you can conduct basic market research, including seeking the opinions of family and friends. Also be sure to speak to people you don’t know.
Tip: Don’t just rely on secondary research, web resources or surveying only the people you know. Poor research can steer your business in the wrong direction.
This seems like a very obvious step, because you would need a business plan to secure a business loan. However, this step involves strategic planning and requires your full involvement. It will involve identifying your funding, business risks, as well as your aims and objectives. Here you will also evaluate your competition and understand your business’s cashflow.
Tip: Focus on the vision and viability of your business, potential for profits and the resources required, as well as a strategy for your success.
The assitance of a reputable accountant can prove invaluable when starting your own business. They will be able to provide you with assistance, objectivity and expertise. Your accountant will also be able to help determine the best legal structure for your business and help you establish bookkeeping and other forms of record-keeping procedures. This will ensure you stay on track and up-to-date on all your paper work.
Naming a business is a key decision. The name of your business is the first thing that potential customers will notice, so think of it as the entry point for your business.
Think about your target market, product/service and image that you want to project to your market. Your name should work well wherever it is used, whether over the phone, on stationery, website, logo, etc.
Also, it’s important to check whether the name you want to use is available. You can do this by searching the National Business Register.
Remember: Whatever name you choose, it should make you stand out from your competitors.
No matter what structure you choose, you are likely to work with a number of different people to develop your business, such as suppliers, possibly distributors and maybe partners.
You may want to find a co-founder with the necessary skills and knowledge in order to assist where necessary. Whether you need materials to make your product or equipment to run your service, it’s possible that you will work very closely with your suppliers.
A good way to search for reputable suppliers is by asking other businesses in your field or by searching online. Make a list of those that you thought were good and arrange a meeting in order to talk about their prices, to develop a relationship and to get an idea of which suppliers are reliable and trustworthy.
Before you register and begin trading, you must choose which legal structure is suitable for your business. When deciding, it’s wise to understand what each structure involves. Most businesses in the UK are sole traders, limited companies or business partnerships. You also need to find a way to fund launching your new business. There are many other steps you have to consider when wanting to start your own business, but by following the above steps, you will be ahead of the game.
This blog was provided by 1st Contact Accounting.
When setting up a business it pays to limit your start-up costs. It’s reassuring to know there are affordable options for start-ups. Here are five ways you might be able to minimise your start-up costs, while still hitting the ground running…
If your business is new, it’s unlikely you’ll be able to splash out on premium office space. Setting up a business from home has been made easier thanks to smart technology, super-fast broadband and the flexibility to work when you want. But when your four-year-old picks up the phone to your new client, it can end up costing you.
Entrepreneurs are now combining the flexibility of home working with the use of a local, managed workspace. This way they can benefit from a fully equipped office and meeting space as and when they need it.
When you first start out, you’re keen to follow any lead, and research we carried out suggests entrepreneurs would meet almost anywhere to secure a deal. When asked where the strangest places they’ve ever held a business meeting some of the weird and wonderful answers included the back of an ambulance, a navy warship and a cave! Coffee shops are a tempting meeting place, but negotiating while surrounded by talkative shoppers could prove tricky. Our research suggests 64% of business people would choose business centres over coffee shops when they need to be professional and productive.
When a prospective client contacts you, you must seize the opportunity. But important calls can come through to you when you’re queuing at the bank or boarding a plane. A ‘virtual’ receptionist is an independent contractor and more affordable than a member of staff. The receptionist, who’s often multilingual, will answer with your business name and can extend hours of availability so you never miss a business call again.
“Social media is to marketing as eye contact is to a handshake,” says social media guru Meg Fowler Tripp. Around 1.1bn people use Facebook every day and 200m go on Twitter, according to BuzzFeed. No new business owner would turn their nose up at free marketing, that’s why so many businesses now use social media channels to promote their products or services. But don’t ignore channels such Pinterest, Instagram and YouTube, particularly if your business has a visual aspect.
Even some of today’s most successful entrepreneurs, such James Caan (formerly of Dragons’ Den), didn’t start out in their own office space. He, like many other new business owners, opted for a virtual office, complete with a virtual address.
This affordable solution is increasingly popular among start-ups, home-based businesses and companies expanding into new regions. It eliminates the expense of renting while offering a business presence. Providing you with a local business address and phone number, it’s a convenient stepping-stone to a physical office.
By Anna Smith of serviced office provider Regus
“Global flexible workplace provider” Regus asked 26,000 people from 90 countries about their attitudes to meetings places. Some gave some pretty bizarre answers when asked for the strangest places they’d ever met a client…